Crude oil futures consolidate after overnight decline on weak demand outlook

Singapore — 0330 GMT: Crude oil futures were rangebound during mid-morning trade Sept. 3 as the market clawed back some overnight losses, led by waning sentiment in a highly uncertain macroeconomic environment amid a drop in seasonal gasoline demand.

At 11:30 am Singapore time (0330 GMT), ICE Brent November crude futures were up 1 cents/b (0.02%) from the Sept. 2 settle at $44.44/b, while the NYMEX October light sweet crude contract was up by 8 cents/b (0.19%) at $41.59/b.

"I think crude was oversold on Wednesday [Sept. 2] and is likely to bounce back up," Vandana Hari, founder and CEO of oil consultancy firm Vanda Insights told S&P Global Platts Sept. 3.

"The drop in gasoline demand spooked the market, but weekly US consumption data is never a good gauge of trends and in this case all the more so, as it might have been skewed by the US Gulf storms causing disruptions in coastal Texas and Louisiana," she added.

Total products supplied, a proxy for demand, declined by more than 13% during the week ended Aug. 28 at 16.98 million b/d, US Energy Information Administration data released Sept. 2 showed. This was the largest weekly decline in demand since the week ended April 3 and pushed the weekly products supplied to the lowest since the week ended May 29. Likewise, total finished motor gasoline supplied fell 4.1% to 8.79 million barrels.

Notably, this sell-off came despite a sixth consecutive drawdown in US stockpiles. US commercial crude inventories declined 9.4 million barrels to 498.4 million barrels for the week ended Aug. 28, while total motor gasoline inventories declined 4.3 million barrels to 234.9 million barrels, about 4% above the five-year average.

Meanwhile, distillate fuel inventories declined 1.7 million barrels to 177.5 million barrels, staying about 23% above its five-year average.

"While the massive crude stock-draw may be attributable to a plunge in net imports, gasoline and distillate stocks declined despite a drop in refinery run rates. All in, I would see the data as mixed, certainly not that bearish," Hari added.

At 11:30 am Singapore time (0330 GMT), NYMEX October RBOB stood at $1.2025, up 0.04% from $1.2020/gal at the Sept. 2 close.